Six Pixels of Separation - The Blog
February 8, 2008 8:33 PM

Online Social Networks And Advertising Don't Mix

With all of the excitement surrounding online social networks like Facebook, MySpace and Bebo, a couple of chinks in the armour are already appearing. Most recently, Mark Zuckerberg appeared on 60 Minutes and said that advertising is the main revenue stream that he foresees for Facebook's success (you can watch the whole interview online here: Facebook: The Entire ‘60 Minutes’ Segment). Then, today I noted two news items. One from Business Week titled, Generation MySpace Is Getting Fed Up, and the second is an editorial piece from MediaPost - The Past Repeats Itself - Social Media Needs Advertising. Two very different ways of thinking.

In the middle of all of this, it looks like usage of online social networks is either stagnating or staying the same (i.e. no huge growth like the last quarter).

Here's what we know according to the Business Week article:

"The average time spent per user on social networks has fallen 14 percent in the last four months, according to ComScore. MySpace, the No. 1 social network, has seen its traffic fall from 72 million users in October to 68.9 million in December. 'What you have with social networks is the most over-hyped scenario in online advertising,' says Tim Vanderhook, CEO of Specific Media.

That said, advertising on social networks is growing fast: eMarketer, a research firm, expects advertising on social networks to surge 75 percent to $2.1 billion this year, up from $1.2 billion in 2007. But could it be that advertisers are late to a party that's ending? Perhaps. Business Week calls the projection 'unrealistic', because aside from slowing growth, advertisers and ad network operators say social networking users are becoming less responsive to ads. If that trend continues, social networking could end up just another niche market, 'smashing hopes and valuations across Silicon Valley.'"

There might be another correlation that has some Bloggers a little antsy to spike the wooden stake in those nasty Vampire bites forever: the more advertising and marketing that is done in online social networks, the more people will reject it, limit their use and/or leave the environment entirely.

I'm not buying that.

Media channels have always been ad-supported. I also don't think that overall Internet usage was affected by the onslaught of online advertising - from banners and email to search and affiliate marketing - we're being inundated from every angle, and yet online - as a media channel - continues to grow with more and more adoption with newer advertising technologies being introduced all the time.

Do I think Consumers love having ads in every corner of their media experience? No. Do I think that people accept the advertising as a cost for all of this free stuff? A little bit.

Let's all take a nice long breathe. Online social networks are new. This is not the end - it's not even the beginning. No one is certain where the revenue models are for online social networks, and no matter where we find them, there will still be many forms of advertising and marketing as part of the mix.

Well-targeted messages that inspire and inform are a good first step in rectifying the current hiccups.

By Mitch Joel


Comments Comments Feed
  • Posted by Jeff P
    Mitch Joel

    Mitch -
    Aside from direct advertising on certain sites, I see wide open spaces for corporate blogs where the indirect form of advertising there shows plenty of opportunity. At least that's what I'm banking on.

    Reply
  • Posted by Linda Lok
    Mitch Joel

    With the bombardment of advertising from every corner on a page - which is becoming is extremely irritating on myspace, and obnoxious on facebook via the way they insert a real estate ad. in the middle of your home page - and with consummers becoming insensitive to it, I'm banking on a future of indirect advertsing via new member driven sites like http://www.gotop5.com where corporations will have to provide constructive feedback to bad ratings.

    Reply
  • When will marketers and advertisers realize that interruption marketing is on death's door?

    My entire podcast is an ad. It's one very long ad for my company's products and services. To the 3,500 listeners per episode, it's not an ad. It's useful information, and it's good content. (or so I'm told from those who write in)

    An ad that is just interruption marketing provides almost no value. No value means no attention and none of my time.

    The future of advertising is providing good content. The split of the 1950s when advertising and content went their separate ways at the advent of television is being repealed day by day online. Advertising as content, content as advertising.

    Ultimately, if your stuff is good enough, valuable enough, important enough, you will get the business.

    I certainly know that if I ever need to do business in Canada, Twist Image would be my first choice in marketing firms. Your blog may not explicitly an advertisement for your services...

    ... but it's the best advertisement of all.

    Reply
  • Posted by Matthew Ebel
    Mitch Joel

    All I know as a musician is that the most effective places to sell music are at your own live shows and while people are listening to other, similar artists online. Perhaps that's applicable?

    Reply
  • Posted by Rick Wolff
    Mitch Joel

    Mitch, my motives for asking this question are solely of self-education. With how many grains of salt should I take the advice not to perceive a plateau in social media advertising from someone whose stock in trade, it can be argued, is just such advertising?

    Reply
  • Posted by Luc St-Pierre
    Luc St-Pierre

    I don't the problem is caused by ads. I Think this is mostly related to the fact that people still try to enforce the same models over and over.

    How many spam thread and "chain letter" do you see on social website? tons and it keeps growing. Customer get tired of this and spend less time on those site because of this. They don't mind the advertisement, but they don't want offers for little blue pills or knowing that child # 93898423 will die if we do not forward this text. We already get enought of those throught junk.

    Just my two cents

    Reply
  • Mitch Joel

    I am always wondering about how well targeted advertisement really works.. And how you overcome the disadvantages because it's always also a problem with protecting your personal data.

    To make it really work a system probably needs to know a lot about you. It maybe should not display a TV ad to you if you recently bought one.

    I am also not sure if people are really not willing to buy in for an adfree service with better features. I don't know about the amount of paid accounts on flickr but I know that I bought some because it's the full feature set.

    The problem on usual social networking sites is that you actually cannot opt out of advertisement so there are maybe no real number of how willing people really would be to do that. It probably also would mean for social network providers to setup their own billing system etc. Not sure if doing just ads is not easier then.

    But you are right when you say that we are very new in the game.. For the social networking sites it might just mean that the "newness factor" is over and people eventually get annoyed by either ads or apps, who knows. So we might know better someday in the future.

    Since then I still hope though that alternative models will be tested as well.

    Reply
  • Posted by Nabilah Said
    Mitch Joel

    When online social networks and advertising don't work:

    When it's like junk mail, unwanted and makes you irritated just receiving it.

    When it does:

    1) When you are looking for it and can find it easily. (And then disappears the moment you don't need it)

    2) When it comes to you in the form of something relevant, interesting or even controversial: eg. an entertaining Youtube video

    When it comes to you in the form of something so radically refreshing and new that you can't help but want to find out more

    Reply
  • Posted by Tarun Tripathi
    Mitch Joel

    Woeking in "Bollywood" and Indian Content for a long time, and now having just entered the social network arena, i agree completely with christopher - there is a thin line between marketing and content. Also, I think that social networks are great "levellers" - they give a platform where ANY content creator can "cut" from the middle man, and interact directly with his potential viewers/market. but... That's a GOOD thing right? that's marketing too...

    Reply
  • Posted by Trade show exhibits
    Mitch Joel

    Social media is sort of new. Myspace and Facebook recently became huge. I think with old media going away and new media coming into place, social media ads won't go away. Sometimes it is annoying, but at the same time, it's avoidable. Social media will not go away for a long time. We are dependent on technology, especially the internet.
    But who knows, there might be a tipping point in the near future.

    Reply
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